Vendor Development Program

About everyone who has a PETRONAS license (there’s another story) dream on getting onto the Vendor Development Program (VDP) or become a VDP vendor.

The VDP is meant to nurture Malaysian companies by allowing the selected company to be on a shortlist (of one, I think) of approved suppliers for different product categories. For example, Process-3 is the VDP for “upstream and downstream sectors ‘Online Toxic Decontamination’ Chemical & Services Provider”.

The selected company typically starts of being an agent or stockist for a product. By disallowing fair competition, the company is provided with the opportunity to invest in the product, either spinning off related product lines as a result of technology transfer, or by taking up the challenge of setting up a local product line.

You can read about articles praising the VDP program here, here and here (really old news this). Note that there is a CLUB for VDP vendors. Talk about protecting your interests.

There are a number of advantages to the VDP vendor:

You have the opportunity to recoup your capital investment in a potentially risky decision. As everybody will have to buy from you, you a guaranteed a healthy market.

PETRONAS will have a big interest in making you succeed, so you can be sure of guidance and oversight from Big Brother.

You have a clean sweep of your product category, making your competitors jump through hoops to get the Production Sharing Contractors or Operating and Production Units approval to use their products. Think of it as a sanctioned blue ocean strategy, by kicking out the rest of the fish.

I can see disadvantages here:

Sometimes it seems like whoever is first to the post, wins. I have heard of a case where the VDP promised to construct a fabrication plant when awarded the VDP. It’s still a promise.

No garauntee of quality. A VDP product is not necessarily the best. Those in the industry complain about the quality of service from various VDPs, but what can we do about it?

If it was you, wouldn’t you try to get VDP status to make a quick buck, after doing a SWOT analysis?

I think it kinda defeats the spirit of enterpruenership. What happens to the small fry who has developed a local product, but it happens to be in a VDP category where a megalith company has taken root? I happen to know that there is a local mechanical seal manufacturer with patented products running a factory in Shah Alam, but he can’t even enter a VDP category because there is already someone there, and the powers that be in licensing won’t consider his application.

If the market segment is larger than what the VPD vendor can provide, you have effectively limited the ability of the oil & gas market to respond according to the demand of market forces. The VDP vendor is free to dictate prices according to artificial purchasing pressures. “You want that screw today? We’ll sell it to you for 10,000% markup, if not come back when Mars is at its closest approach to Earth.”

Of course, not everyone is as twisted as me and Jabba. I congratulate Corro Shield for graduating from the VDP program, which gives me hope that there are people out there with the interests of Malaysia and the rakyat at heart.

I think it kinda defeats the spirit of enterpruenership. What happens to the small fry who has developed a local product, but it happens to be in a VDP category where a megalith company has taken root? I happen to know that there is a local mechanical seal manufacturer with patented products running a factory in Shah Alam, but he can’t even enter a VDP category because there is already someone there, and the powers that be in licensing won’t consider his application<<<—- R u sure??? do a site visit to his "factory"

i understand your concern but i dont think all VDP com are like that.. okay.. maybe majority are.. but there is some that is really passionate about technical and engineering and put commercial value later.

the swec list were done by people who dont understand the full scope of the work/supply. some swec even scares me because the scope is highly dangerous and lti proned but the mtr states -na-. go figure

Most of the VDP company is not really a ‘Bumi’ company, as most of the original bumi company has been sell off after obtaining the VDP (easy money). What’s the point of having VDP in the first place??… There are lots of scumbag (money making people) out there who are enjoying themselves from this flaw.

do you guys really know who is on the loosing end here?…its Petronas. dont be surprised. it is because of these VDPs selling their stuffs and controlling the market, Petronas is just getting b grade stuffs. and even i have introduced a product which has existed 30 years ago from the overseas to Petronas, they screamed Wahh!! this is new technology!!. Petronas is putting themself in a silo and they could have and should have been at the top of fortune 500 by now.